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After a rough year in which they had to lay off staff and impose pay cuts on those who remained, Taylor Gregory Broadway Architects nevertheless wanted to find a way to celebrate the holidays.

Like many companies, they faced two problems: a small budget and a nagging worry that a party would strike employees as distasteful in such tough times.

The company’s partners decided to ask employees to come up with a plan. But instead of planning a party on a shoestring budget, the staff decided to use the party fund to sponsor a needy local family.

“As difficult as it is for them, they all recognize that it may even be more difficult for people elsewhere,” said Lois Broadway, one of principal architects in the Edmonds, Wash., firm.

As the recession prompts more employers to scale back or cancel holiday parties, some are looking for alternative ways to celebrate the season without spending too much money or appearing ostentatious.

For some companies that means organizing volunteer efforts instead of parties, while others have come up with creative, low-cost ways to reward employees.

Even in tough times, it’s important for companies to find ways to boost employee morale and build team spirit, said John Challenger, chief executive of the outplacement consulting firm Challenger, Gray & Christmas. Yet companies should avoid opulent celebrations that might alienate employees who have endured cutbacks or seen friends lose their jobs, he said.

“(They need to) respect the fact that money is not there like it might be in the best of times,” Challenger said.

A survey by the firm found that just 62 percent of companies are planning holiday parties this year, down from 77 percent a year ago and 90 percent in 2007.

Potlucks and donations
At Taylor Gregory Broadway Architects, a Christmas tree is decorated with paper ornaments listing items from the sponsored family’s wish list. The staff of around 25 also will draw names and exchange small gifts with each other and will hold a low-key potluck.

It’s a far cry from past holiday parties that have included renting a space and bringing in catered food and a band. But Broadway said the plan seems to be sitting well with the staff and felt right to the company’s top executives.

“As partners, we even looked at each other and said, ‘You know what, we don’t feel right throwing a party for our staff when (we) could be allocating money toward their bonuses or putting back some measure of their salaries,’” Broadway said.

The partners at Chuck Kulig’s consultancy outside Chicago had a similar feeling when they sat down to discuss their holiday plans this year. After talking about traditional holiday celebrations, Kulig said they decided to volunteer time at local nonprofits instead.

“This isn’t the time to be extravagant,” Kulig said. “A lot of people are in need. A lot of people are out of work.”

Kulig is perhaps more acquainted with these struggles than most. He and a group of other retired executives started their small business consulting firm, GWA Consulting, to help fund Get to Work America, a nonprofit Kulig runs that helps unemployed people find work.

Kulig volunteered his time serving food at Thanksgiving and plans to spend Christmas at a center for homeless people.

“I can’t describe the emotion that you have when you see people coming in with their kids and sitting down and eating with people, and they’re smiling,” he said. “It was the best feeling. This was better … than any party I’ve ever been to.”

Some larger companies also are looking at more charity-oriented holiday events this year.

At consulting firm KPMG, thousands of employees spent time last week putting together gift packs of a book and a teddy bear, dressed in a KPMG T-shirt, to be sent to needy children.

“With more and more people seeing the negative effects of the economy, we really thought that it would be more in the spirit of the holidays and a more satisfying experience for our people if we did something that was more focused on community service,” he said.

The charity event also saves money, showing that the company isn’t spending frivolously in tough times, Pfau said.

“We wanted this to be viewed as a very wise and judicious spend that was going to help a lot of people and build a lot of morale and really show our people what really mattered,” he said.

KW Automotive North America, which makes high-end vehicle parts, will use reward points from its corporate American Express account to give employees gift cards, said Corina Jimenez, the company’s controller.

The Sanger, Calif., company won’t make a secret of the way the gift cards are being obtained, because executives don’t want their approximately 25 employees to think they are spending a lot of money in a year when there have been a few layoffs and an increase in insurance premiums.

“(We’ve) tried to make people aware that we’re doing these kinds of cost-saving things,” Jimenez said.

Sometimes even low-cost gestures can make employees happy.

Toshiba Business Solutions in Tempe, Ariz., hasn’t held a holiday party since 2006, when the company decided to offer an extra paid day off at the end of the year instead. The “gift of time” program lets employees pick from two days around the Christmas and New Year’s holiday when business is typically slow anyway.

Brad Osborn, vice president of sales, said the decision came after several years in which attendance at the annual holiday party had dwindled.

Spend more to make more?
For a select few companies, this year’s alternative holiday celebration will go in the other direction: It will be more expensive and lavish.

The traditional holiday luncheon at Tony Stubblefield’s car dealership in Springfield, Mo., will be about the same as in years past, with the exception of one thing: The company has doubled its budget for gifts for its approximately 150 employees to more than $20,000.

Stubblefield, manager partner of Reliable Toyota Lexus BMW Audi and Scion, said he thinks the decision to spend more is in keeping with the spirit of the holidays. He also sees it as a way to help boost the struggling economy.

Stubblefield also sees a lavish holiday party as a good way to improve morale and maintain employee loyalty. In the end, sending employees home for the holidays happy could do more for the bottom line than cutting costs, he said.

“We’ll make $30,000 to $40,000 less money, but in the scheme of things, what if it makes us $300,000 to $400,000 because they come back with a positive attitude?” he asked.